FUEL pump prices are likely to be hiked in view of increased oil prices on the international market, compounded by the unbalanced oil subsector obtaining in Zambia where foreign players continue dominating, says Oil Marketing Companies (OMCs) Association president Dr. Kafula Mubanga.
And Dr. Mubanga has observed that government’s intention to restructure the fuel supply chain to achieve least cost pricing, while ensuring stable supply of petroleum products, is a welcome move but may be difficult to implement in practice due to limited local OMCs’ participation.
Brent Crude oil prices on the international market have skyrocketed to over US $83 per barrel, a three-year high, according to prices tracked by oil-price.net, the commodity pricing monitor. And a review by the Zambian Business Times – ZBT shows that crude oil prices are at a three-year high, the kwacha has equally continued to depreciate steadily to around K17.50 per dollar by early November.
The commodity’s pricing is influenced by the two key factors being the kwacha and prevailing oil price on the international market as oil is imported into Zambia at spot prices, usually via Dar Es Salaam, either as comingled stock through the Tazama pipeline onto Indeni Petroleum Refinery in Ndola or as finished products via OMCs.
Commenting on the development, Dr. Mubanga warned that local fuel pump prices, which were last hiked to K17.62 per litre of petrol in December, 2019, would inevitably be increased owing to the deteriorating macroeconomic fundamentals, compounded by the uneven structure of the oil subsector on the local market that has continued to favour foreign OMCs over local businesses.
“Government has not committed itself to empowering the local OMCs by putting up an S.I. (Statutory Instrument) that will compel the large and mostly foreign owned OMCs to engage the local and upcoming OMCs in terms of market share; they have deliberately ignored that. Now, with that in mind, these majors (OMCs) are here to make profit, so they will not entertain the local OMCs because it provides competition for them.
So, we are still vulnerable because government has not provided that platform, which has a legal framework that compels the large and foreign owned OMCs to engage the locally owned OMCs in terms of market share. So, I can guarantee that, there will definitely be a steep rise in terms of the pump price because the business environment has not been levelled in terms of participation by government by ensuring the locally owned OMCs also participate,” Dr. Mubanga said in an interview.
“Yes, definitely, it may not be today, but definitely, there will be these effects passed on to the end user. Remember, we just import, we do not have a functional refinery, currently, so we are getting imported products into Tazama; we are basically depending on the imports. So, we are likely going to see an increase in the pump price. It might not be now, it might be soon or even next year.”
